"The pricing of pharmaceutical products can be controversial. A recent example is EpiPen
produced by Mylan which is used to treat anaphylaxis. The retail price of an EpiPen is
$300, while industry sources estimate that it costs around $30 to produce each unit (i.e.
one dose). Despite this high price, Mylan sells 1 million units a year."
Based on the above information, I have been told to solve the following question:
"Assume Mylan's indirect demand function is linear: P = a – bQ, where Q is measured
in millions of units. Using the definition of the point elasticity of demand, the elasticity
you calculated in part 1 and the unit sales of EpiPen, find the values of “a” and “b” in the
above equation."
I have already found the Elasticity in Part 1, it was found to be -0.9, but I am unsure on how to proceed.
1
Expert's answer
2017-09-29T10:01:07-0400
As P = a - b*Q, P = $300, Q = 1,000,000 units and Ed = -0.9, then using the definition of the point elasticity of demand b = |Ed| = 0.9, so: 300 = a - 0.9*1,000,000, a = 900,300.
Numbers and figures are an essential part of our world, necessary for almost everything we do every day. As important…
APPROVED BY CLIENTS
"assignmentexpert.com" is professional group of people in Math subjects! They did assignments in very high level of mathematical modelling in the best quality. Thanks a lot
Comments
Leave a comment